A report by the National Center for Socio-Economic Information and Forecast (NCIF) released in August said that Vietnam’s GDP could drop 0.03 percent this year, 0.09 percent next year and 0.12 percent in 2020 and 2021 due to impacts of the US-China trade war.

This equals a GDP drop of VND1.65 trillion ($71 million) this year and VND5.3 trillion ($228 million) next year. The decline will climax at VND8 trillion ($344 million) in 2021.

The Vietnam Institute for Economic and Policy Research (VEPR) had previously cautioned that the trade war could prompt large corporations to send their capital back to the developed countries as developing countries lose their attraction.

Technology giants like Foxconn are investing more in manufacturing in the U.S. as a result of the trade war, the VEPR noted.

“We need to diversify our markets and trade partners to reduce dependence on China and the U.S.,” Dong stressed.

In the first nine months this year, the U.S. was Vietnam’s largest export market, accounting for 19.5 percent of Vietnam’s total exports, a growth of 13.2 year-on-year, according to Vietnam Customs.

China was the third largest export market, with the highest growth rate of 29.9 percent. It was also Vietnam’s largest import market, accounting for 27.3 percent of Vietnam’s total imports.

Tran Tuan Anh, Minister of Industry and Trade, said that as geographical and political tensions between the U.S. and China escalate, the Vietnamese government needs to limit risks for the country.

He told the National Assembly that he would report in more detail on this issue.

Taking advantage

Dong said that Vietnam could also benefit from the tensions, exporting more to the U.S. and welcoming more foreign direct investment as companies leave China.

Adidas CEO Kasper Rorsted also said in May that his company was shifting footwear sourcing from China to Vietnam, and data from Nike showed that Vietnam produced 46 percent of its footwear last year, against 27 percent in China.

The U.S.-China trade war escalated last month as the U.S. levied new tariffs of 10 percent on about $200 billion worth of Chinese products, with the tariffs to go up to 25 percent by the end of this year.

China retaliated immediately with 5 and 10 percent tariffs on $60 billion worth of U.S. products.